How China's De Facto Travel Ban May Help Foreign Brands

The changes in the Chinese consumer market over the past two decades have been nothing short of astonishing. Between 2000 and 2020, the average disposable incomes of urban Chinese grew seven-fold from around ¥6.3K to almost ¥44K. Even more of note is those consumers’ collective net worth, which skyrocketed from $7 trillion to $120 trillion.

This has supported the emergence of a massive consumer class in China, fuelling everything from car drivers to milk drinkers. Yet the most visible transformation has been the rise of Chinese outbound tourists. In 2000, Chinese travellers made around 10 million trips outside of the mainland, mostly to Hong Kong.

By 2019, they made 155 million trips, with less than a third to Hong Kong.Rising wealth undoubtedly was the largest contributor to the increase in overseas travel, but friendlier visa policies and accessibility was also a significant driver, coupled with more and easier flights. Between 2015 and 2018, the number of direct city air connections between Thailand and China grew from 69 to 148, for example. There were also the social drivers such as the status from travelling overseas, inspired by social media posts from friends, family and colleagues abroad. Chinese consumers' curious natures and desire for new experiences were whet by the ability to increasingly travel.

That is why many Chinese will be pretty disappointed by Beijing's announcement last week that it would "strictly limit" overseas travel for "non-essential" reasons. It is the latest initiative to support China's unwavering zero-covid policy. Some consumers defended the de facto travel ban, saying it was reducing the risk of covid infections. Others have supported the decision to keep Chinese safe, protecting them from risks of travelling to Europe during the Russian-Ukrainian war, or to America in light of the shootings in Buffalo. For others, the news couldn't have come at a worse time, when they are already questioning China's increasingly punitive lockdowns, driving a spike in those considering migration.

One of the key drivers of Chinese nationalism since the pandemic began, aside from the inability to open minds through travel, has been the way that Beijing has handled Covid. People in China have lived mostly-normal lives since the short and sharp lockdowns in early 2020, and watched as other countries like the US and UK imploded under the weight of the pandemic. That helped boost national pride and question the credibility of other countries. Chinese consumers - particularly those in Shanghai - seeing friends, families and strangers overseas getting back to normal lives and travel, are now questioning if China's approach really is the best approach.

As a result, the travel ban could go one of two ways. It could further increase nationalism through the resulting isolation. But there is a good chance that we may see a reverse of nationalism from some camps as consumers become fed up with stringent dynamic zero-Covid policies.

Other countries may start to look increasingly aspirational again and, by proxy, brands and products from those lands. The allure of foreign brands may gain appeal as they are considered more exclusive, we may even see the renaissance of the daigou trade as a result, when logistics allow it.

The measures may also have an impact of increasing foreign student numbers. Studying abroad remains a way Chinese can get passports and tickets to travel, and could be seen as a pathway to break the cabin fever and explore the world again.

Chinese consumers are generally quite stoic and adapt to new Beijing policies and regulation. But the inability to travel for the foreseeable future is likely to test some tolerance. They have tasted the forbidden fruit of overseas travel, and taking that away for longer, while most of the world enjoys it again, may lead to some unintended consequences. We will be monitoring closely at the Skinny.

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